V. Durga Rao, J.M:— This appeal filed by the Revenue is directed against the order of CIT(A)-6, Mumbai, passed on 31/03/2010 for the assessment year 2006-2007.

2. Ground No. 1, 2 & 3 are directed against the action of the CIT(A) in allowing the claim of depreciation of Rs. 7,10,13,001/-.

3. Briefly stated the facts of the case are that the assessee company is engaged inter-alia in the business of power generation by means of wind mills. The assessee had claimed the depreciation in the original return of income filed on 29/11/2006 @ 7.69% as per the Straight Line Method (SLM). However, in the revised return filed on 15/11/2007, the depreciation claimed on SLM basis was changed to Written Down Value Method (WDV) and hence claimed at an enhanced rate of 80%. The AO noted that since Rule 5 of the IT Rules permitted an option to the assessee to claim depreciation either on SLM basis @ 7.60% or on WDV basis @ 80% only once and that too before the due date of filing of return, such a change was not allowable to the assessee. The AO noted that since the option was to be exercised only before due date of filing of return u/s. 139(1), the option could not be exercised/changed in the return filed u/s. 139(5). The AO also noted that the books of accounts for AY 2005-2006 had gained finality once they were audited and in which the assessee had exercised its option of choosing to claim depreciation on SLM basis @ 7.69% and that the same could not be changed thereafter. The AO further noted that the assessee had followed the method of claiming depreciation on SLM basis consistently over the years and therefore the same could not be claimed to be a mistake which could be rectified by revision of return. In the conclusion, the AO disallowed the claim of the assessee made in the revised return to claim depreciation on WDV basis. Aggrieved, the assessee carried the matter in appeal before the CIT(A).

4. Before the CIT(A), the AR of the assessee submitted that under the provisions of section 32 read with rule 5, an assessee was given an option to claim the depreciation at the higher rate as compared to the rate prescribed in appendix 1 A. This option had to be exercised by the assessee before due date of filing the return. The AR furnished the details about percentage of depreciation claimed in the past as well as in future by the assessee, which were extract by the CIT(A) at page 3 of his order in the tabular form. The AR of the assessee further dealt with individual observations/objections raised by the AO in the assessment order, which were reproduced by the CIT(A) in his order at pages 3 to 6 of his order. The learned AR placed reliance on various case laws before the CIT(A), which were mentioned at page 7 and the gist of the cases mentioned at pages 7 to 13 of CIT(A)'s order. After considering the submissions of the assessee, the CIT(A) held as under:—

“5.3 I have considered the facts of the issue as well as written submissions filed by the AR. The AO has clearly misstated the facts and placed reliance on wrong appreciation of facts by noting in his assessment order that the appellant was claiming depreciation @7.69% in the earlier years. The AO has also wrongly noted in the order that the option was exercised by the appellant ‘after due diligence and application of mind and as a matter of consistent policy followed by the assessee over the years.’ The AR has clearly brought on record the fact that in the earlier years, the depreciation was claimed 800 on the WDV method and not @7.69% as stated by the AO. Depreciation @80% was also claimed in the year 1997 as well as in the immediately preceding year. On this issue, there is merit in the submissions of the AR that the revised return was filed to claim depreciation @80% as per past practice. There is also merit in the-submissions of the AR that the appellant had corrected the wrong’ statement which was against the consistent policy that was followed in the past. There is also merit in the submission that the omission to foflow the past practice was a mistake and the revised claim was filed to correct the omission and follow the consistent policy.

5.3.1 There is also merit in the submissions of the AR that the option is given to an assessee and that the same cannot be treated as mandatory. The AR has brought out enough legal authority to establish that the said option could be revised in the revised return and that the revised return would replace the original return filed by them. The appellant's case also gets streng Lh from the ratio of the Supreme Court judgment in the case of CIT v. Mahendra Mills in which it was held that if the revised return is a valid return and the assessee has withdrawn the claim of depreciation, it cannot be granted relying on the original return, when the assessment is based on revised return. This judgment relates to the pre-amended law in which an assessee was to get deduction of depreciation only when he furnished details in the prescribed form with the return of income. Thus, an option was given to the assessee to furnish or not to furnish the details. Such an option was reversed in many cases by the assessecs by withdrawing in the revised return, the details filed - for claiming depreciation. Thus, drawing an analogy from a similar legislation, there is merit in the claim of the appellant that the revised return would effectively replaced the original return and the revised loss on account of claim of depreciation @80% needed to be accepted.

5.3.2 It is clearly not a case where the assessee is changing the option a subsequent year after exercising the option in one particular way in an earlier year or initial year. The language of proviso to rule 5 puts a bar on changing the option once exercised so as to take a different position in the subsequent year. In the present case, the appellant has revised its return, which has the effect of replacing the original return. Thus, the appellant is not changing the option in a subsequent year so as to claim depreciation at two different rates in two consecutive years.

5.3.3 There is also no merit in the findings of the AO that the books of account of the appellant having gained finality, once they were audited the appellant could not have exercised the option to change the rate of depreciation. There is merit in the submissions of the AR that the deductions under the I.T Act are allowable under the provisions of that Act and not on the basis of the books of account. A large number of adjustments are frequently required to be made to the profit as reflected in the profit and loss account for working out the taxable income as per the provisions of the Act. Mere finalization of the accounts does not mean that no adjustment to the depreciation as per books was warranted. In fact, the Companies Act and the I.T Act provide for different rates of depreciation and for computing the taxable income, invariably the profit as per P. & L account has to be adjusted to claim depreciation as per I.T Rules.

5.3.4 In view of the discussion in the foregoing paragraph and the legal position brought out by the AR, it is held that since the revised return replaced the original return, the option also stood duly replaced in the return and hence the revised claim would become available to the appellant as made before due date of filing of return. This ground is allowed.”

5. Aggrieved by the order of the CIT(A), the revenue is in appeal before the Tribunal.

6. The le arned D.R has strongly relied upon the order of the AO and the learned counsel for the assessee has placed reliance on the order of the CIT(A) and relied on various case laws and Tribunal decisions including the decision ITAT, Ahmedabad Bench in the case of Gujarat State Energy Generation Ltd. in ITA Nos. 1221.Ahd/2006 & 1271.Ahd/2006 for AY 2002-2003 order dated 03/03/2009.

7. We have heard the learned representatives of the parties and perused the record as well as gone through the orders of the authorities below. The assessee changed the method of depreciation from Straight Line Method to Written Down Value method in the revised return. Due to this change instead of depreciation of Rs. 4,37,92,377/- that was claimed in the original return the revised depreciation was claimed at Rs. 11,48,05,378/-. Thus, the additional depreciation of Rs. 7,10,13,001/- was claimed in the revised return. The AO disallowed the changed method of depreciation and allowed depreciation as per original return of income. The CIT(A) after considering the submissions as well as case laws relied upon by the assessee, held that “since the revised return replaced the original return, the option also stood duly replaced in the return and hence the revised claim would become available to the appellant as made before due date of filing of return.” We are of the view that the AO failed to take the note that once revised return is filed the original return is totally substituted & assessment is to be completed on the basis of the revised return. Moreover, the issue is covered by the decisions of Courts as well as the Tribunal. In the case of Gujarat State Energy Generation Ltd., the ITAT, Ahmedabad Bench held as under:—

“From the ruling of the Hon'ble Supreme Court in the case of Delhi Cloth and General Company Ltd. v. State of UP 118 ITR 277, it can be held that where the assessee is required to exercise an option before a particular date and thus such option is exercised in the original return, yet if the assessee files a valid revised return, the option cannot be said to have been exercised and he will have right to change his option by filing a fresh and revised return before the assessment is made for that year. In view of this, it can be held that the option exercised by the assessee in respect of claim on depreciation on SLM method gets substituted by the option of claim of depreciation as per WDV method. Accordingly, the AO is directed to allow the depreciation on the basis of the revised claim made in the revised return.”

8. Respectfully following the decision of the Coordinate Bench of Tribunal, Ahemdabad (supra), we hold that the CIT(A) has rightly allowed the asesssee's claim of depreciation of Rs. 7,10,13,001/- and the order of the CIT(A) is hereby confirmed. Accordingly, ground Nos. 1, 2 & 3 raised by the revenue are dismissed.

8. Ground No. 4 is directed against the action of the CIT(A) in allowing stamping charges amounting to Rs. 24,48,051/-.

9. The AO noted that assessee had paid stamping charges amounting to Rs. 24,48,051/- with reference to the wind mills in FY 2005-2006 and no justification was filed in that regard. He, therefore, noted that such stamping charges were payments towards lease of land etc. for the wind mills installed and thereby capital in nature. Consequently, the said sum was disallowed as capital expenditure. On appeal, the CIT(A) allowed the claim of the assessee by treating the same as revenue expenditure. Aggrieved, the revenue is in appeal before the Tribunal.

10. The learned DR has relied upon the order of the AO and the learned counsel for the assessee has relied upon the order of the CIT(A).

11. After hearing the learned representatives of the parties and perusing the record as well as going through the orders of the authorities below, it is observed that the Assessee has not filed any details pertaining to the payment made towards stamping charges. The AO considering the stamping charges as payments towards lease of land etc., disallowed the claim of the assessee by treating it as capital in nature. The CIT(A) without examining the issue allowed the claim of the assessee as revenue in nature. Under these circumstances, we deem it fit and proper to remit the issue back to the file of the AO with a direction to decide the issue after verifying and examining the details in accordance with law after providing reasonable opportunity of hearing to the assessee. The assessee is directed to file the details/material before the AO in support of its claim. Thus, this ground is allowed for statistical purposes.

12. In the result, appeal of the revenue is partly allowed.